Journal entry
Khalid Masroor (Teacher) (99 Points)
26 June 2016
Horse as an asset for Rs 10000 died and carcass sold for 3000.
Khalid Masroor (Teacher) (99 Points)
26 June 2016
Khalid Masroor
(Teacher)
(99 Points)
Replied 26 June 2016
Is it correct:::::
Cash 3000 Dr
Loss on death of horse 7000 Dr
Horse 10000 Cr
Khalid Masroor
(Teacher)
(99 Points)
Replied 26 June 2016
Is it correct::::
Cash debit 3000
Loss on death of horse debit 7000
Horse Credit 10000
Rama chary Rachakonda
(Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294)
(3303 Points)
Replied 27 June 2016
For horse business people, the single horse is not an asset.
Khalid Masroor
(Teacher)
(99 Points)
Replied 28 June 2016
Thank u Sir for reply.
Continuing with this,
1 If it is a only one horse used to transport goods by a seller.
2. In case it is a horse business what would be treatment in that case.
Regards,
Khalid Masroor
(Teacher)
(99 Points)
Replied 28 June 2016
Thank u Kurup Sir,
Replacing horse as an asset by building::
Suppose purchased a building for Rs 10000 and next day it got demaged by quake completely. What treatment accounting suggests here
Regards,
Vivek Kurup
(.)
(355 Points)
Replied 28 June 2016
Sir,
A business organization may be holding an animal either as a means of earning income or for trade. Since in the first case, income will be generated from that animal for more than one accounting period, it is an asset and certainly in the second case, it is inventory.
We cannot assume one will hold an animal as investment since the value of such investment will reduce on a continuous basis (ie. as the animal gets older). No one would like to hold a depleting investment.
Moreover, if we look at the annual reports of many zoos, we could see that they are classifying livestock under Property, Plant and Equipment..!!
@ Khalid Masroor
It would have the same accounting treatment
1. Loss of asset Dr 10,000
Building Cr 10,000
2. P&L Dr 10,000
Loss of asset Cr 10,000
(Assuming there is no insurance claim available)
I didn’t have your exact point. Are you asking whether loss has to be recognized immediately?? Or do you have suggestion for any other accounting treatment??
Khalid Masroor
(Teacher)
(99 Points)
Replied 28 June 2016
Sir
Treating loss from building as capital loss. Does it mean we can transfer all capital losses from building to P&L a/c in single year. Is it permissible
Vivek Kurup
(.)
(355 Points)
Replied 28 June 2016
It is not only permissible, but it’s somewhat essential.
We cannot postpone the recognition of a loss, otherwise than in very exceptional circumstances whereby we have to prove that such loss has an effect on earning the income for the future periods also. But in normal circumstances, loss is always something unexpected and hence it may not have any relation to earning income of t he subsequent years; but that is not the case with an expenditure.
An expenditure can be incurred purposefully for earning income, not only for the current period, but for future periods as well (For instance, advt exp). In such cases, we will defer a certain portion over a period on which we derive benefits of incurring such expenditure.
But since we can neither prove that a loss has resulted in any benefits for any accounting period nor can we prove that such loss has any relationship with the income of the future accounting periods, we have to recognize the full amount of loss immediately.
So, to your question, such losses has to be recognized immediately.
CA shanky pahoja
(accountant)
(615 Points)
Replied 29 June 2016
yes, it is permisable any loss from sale of an asset is chargeble in the year it is incurred. But as per AS 5 if an item is of non recurring in nature then its impact on profit or loss should be made clear by seprately disclosing it.
Kilia Ancy
(2 Points)
Replied 26 August 2019
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